Dinsdale Constr., LLC v. Lumber Specialties, Ltd.

888 N.W.2d 644

DINSDALE CONSTRUCTION, LLC, Appellee,

v.LUMBER SPECIALTIES, LTD., Appellant.

No. 15-0164

Supreme Court of Iowa.

Filed December 23, 2016

Michael A. Carmoney and Allison J. Frederick of Carmoney Law Firm, PLLC, Des Moines, for appellant.

Chad A. Swanson and Nathan J. Schroeder of Dutton, Braun, Staack & Hellman, P.L.C., Waterloo, for appellee.

CADY, Chief Justice.

In this case, we must decide if an employee of a business that sells building materials and services who supplied false information to a builder about the structural integrity of a building under construction had a duty to use reasonable care in supplying the information when it was done as a courtesy to the builder and for the general goodwill of the business. Following a jury trial on claims for negligent misrepresentation and breach of contract, the jury returned a verdict against the business on the negligent misrepresentation claim and the district court denied a motion for judgment notwithstanding the verdict. The business appealed, and we transferred the case to the court of appeals, who affirmed the decision of the district court. On further review, we vacate the decision of the court of appeals and reverse the decision of the district court. We conclude the business owed no duty of care in supplying the information to the plaintiff. We reverse the judgment of the district court and remand for the case to be dismissed.

I. Factual Background and Proceedings.

In 2012, Phelps Implement (Phelps) hired Moeller & Walter, LTC, a lumberyard, to provide building materials and to oversee the construction of an addition to its existing implement dealership. Moeller & Walter subcontracted with Lumber Specialties to provide the truss¹ package, headers and columns for the doors, and connections and hold downs, in addition to certain engineering services. The engineering services included structural building design,² a structural site visit,³ retaining wall engineering,⁴ and an existing building truss review.⁵ Finally, Lumber Specialties provided an industry standard temporary bracing plan.⁶ The contract did not provide for engineering services pertaining to the temporary bracing of the trusses and did not require Lumber Specialties to evaluate the temporary bracing during the course of the construction.⁷ In all, Lumber Specialties contracted to provide $33,247 worth of tangible building materials and approximately $4150 worth of engineering services. Phelps also hired Dinsdale Construction to supply the labor and building materials for the project.

On June 28, the owner of Moeller & Walter, Lynn Trask, visited the Phelps site and met with Kirk Dinsdale, the owner of Dinsdale Construction. By this time, the construction was underway, with some of the smaller trusses placed and supported by temporary bracing. Trask and Dinsdale agreed the construction should be evaluated to ensure the chosen method of temporary bracing was sufficient, especially considering the larger trusses would be going up soon. Later that day, Trask emailed Ryan Callaway, a sales representative for Lumber Specialties. Trask wanted Callaway to visit the site to "take a look at what [Dinsdale Construction] ha[s] done" and advise "[i]f there is any bracing that [is] missing." Email from Lynn Trask, Moeller & Walter LTC to Ryan Callaway, Lumber Specialties (June 28, 2012, 11:35 a.m.). Callaway felt comfortable performing this visit, and he did so that afternoon. He also believed Trask and Dinsdale should have been able to rely on his opinion.

Callaway had prepared the quote for the Phelps project. He had also worked in construction for approximately twenty years. Prior to working with Lumber Specialties, Callaway studied architectural and construction drafting at a community college for one year. He then worked in residential remodeling before accepting a job with Plumb Building Systems (Plumb), another truss manufacturer. At Plumb, Callaway worked in truss design, using software to design project-specific trusses. After three years, he left Plumb and worked a brief stint at a factory before accepting a position with Lumber Specialties, again working in truss design. After another four years, he transitioned to sales, where he has been for approximately ten years. In his capacity as sales representative, he no longer does building designs, nor does he install trusses. His primary job responsibilities involve customer relations and preparing bids.

Callaway characterized the visit to Phelps as a courtesy to his customer, Trask. When he arrived at the Phelps site, Dinsdale was working with his crew on the roof. Callaway looked around, introduced himself, left some promotional pencils, and said something to the effect of, "Everything looks great. Keep doing what you're doing." Dinsdale did not know Callaway was a sales representative; he only knew Callaway was from Lumber Specialties. Callaway was on-site for only a short time.⁸ The next day Callaway emailed Trask:

I stopped by the Phelps site yesterday. They were still installing purlins^[9]and bracing on the trusses that they had set. Steve Kennedy will be doing the final inspection on the building which will include inspecting the bracing. If needed, recommendation will [be] made at that time. Please give Steve at least three day['s] lead time to schedule the final inspection on the building. Thank you.

Ryan Callaway

Outside Sales

Email from Ryan Callaway, Lumber Specialties to Lynn Trask, Moeller & Walter LTC (June 29, 2012, 06:18 a.m.). Trask replied:

Thanks Ryan,

I am aware Steve will be doing the inspection when done. Just thought it would be good to have you stop and check progress [to] see if there are any obvious things that you see that could create more stability during the set stage. Thanks for stopping. Let me know if you have any suggestions or saw anything that I need to be aware of.

Thanks, Lynn

Lynn Trask

Moeller & Walter LTC

Email from Lynn Trask, Moeller & Walter LTC to Ryan Callaway, Lumber Specialties (June 29, 2012, 09:56 a.m.). Callaway replied:

Nothing "jumped" out at me that needed more temporary bracing. I thought everything looked good on what they had completed.

Email from Ryan Callaway, Lumber Specialties to Lynn Trask, Moeller & Walter LTC (June 29, 2012, 10:05 a.m.). Trask concluded the conversation:

That's what I was really asking for.

I have a lot of confidence in you[r] experience and opinion.

Thanks, Lynn

Email from Lynn Trask, Moeller & Walter LTC to Ryan Callaway, Lumber Specialties (June 29, 2012, 11:39 a.m.).

Nine days later, the structure collapsed. There was no personal injury or property damage, but the parties incurred substantial costs in rebuilding the structure. A postcollapse investigation revealed the collapse was due to inadequate temporary bracing of the trusses. Dinsdale had not followed the industry standard temporary bracing plan.

Dinsdale Construction brought suit against Lumber Specialties on breach of contract (as a third-party beneficiary) and negligent misrepresentation theories. Lumber Specialties moved for summary judgment, arguing, among other things, it had no duty to use reasonable care in providing Callaway's interim assessment of the adequacy of the temporary bracing erected by Dinsdale Construction. It argued it was a product manufacturer that should be categorically excluded from owing a duty under existing Iowa law. The district court denied the motion, finding negligent misrepresentation was a question for the jury. After Dinsdale Construction presented its evidence at trial, Lumber Specialties moved for directed verdict, again arguing the negligent misrepresentation claim should not be submitted to the jury. The district court denied the motion. The jury returned a verdict for Dinsdale Construction on the negligent misrepresentation claim, but found no breach of contract. Lumber Specialties moved for judgment notwithstanding the verdict, reiterating that it owed no duty to Dinsdale Construction under Iowa negligent misrepresentation law. The district court again denied the motion, finding the court had already ruled on the issue and that whether Lumber Specialties was in the business of supplying information was a fact question the court appropriately submitted to the jury. Lumber Specialties appealed. The court of appeals affirmed, holding the question was for the court, but finding that Lumber Specialties had a duty of care because it was in the business of supplying information at the time of the misrepresentation. We granted further review.

II. Standard of Review.

"We review the denial of a motion for judgment notwithstanding the verdict for correction of errors at law." Van Sickle Constr. Co. v. Wachovia Commercial Mortg., Inc. , 783 N.W.2d 684, 687 (Iowa 2010). Whether the defendant owed a legal duty is "always a question of law for the court." Fry v. Mount , 554 N.W.2d 263, 265 (Iowa 1996). We review the evidence in the light most favorable to the nonmoving party. See Molo Oil Co. v. River City Ford Truck Sales, Inc. , 578 N.W.2d 222, 224 (Iowa 1998).

III. Analysis.

The Restatement states,

One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

Restatement (Second) of Torts § 552, at 126–27 (Am. Law Inst. 1977) [hereinafter Restatement]. We first recognized and adopted the tort of negligent misrepresentation in providing information in Ryan v. Kanne , rejecting the narrow approach of the common law rule at the time, represented by cases such as Ultramares Corp. v. Touche , 255 N.Y. 170, 174 N.E. 441 (1931). See Ryan v. Kanne , 170 N.W.2d 395, 401–03 (Iowa 1969). We instead followed the path paved by the Restatement,...